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Lumber valuation for tax exemption

Started by Dodgy Loner, May 06, 2009, 04:42:13 PM

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Dodgy Loner

I know the whole lumber pricing thing has been hashed and rehashed on here, but I will be cutting some lumber this summer that will be donated rather than sold.  The lumber will be 7/8" x 6" x 16' pine for a four-board fence for a local non-profit farm.  Since they are registered as a 501(c)(3) non-profit, the donation will be tax deductible.  How would you value the lumber?  Same price as the 1x6's at Home Depot (expensive) or should I find out what local sawmills are charging for rough-sawn pine?  I don't need any trouble with the IRS :)
"There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." -John Ruskin

Any idiot can write a woodworking blog. Here's mine.

SwampDonkey

Can you take advantage of tax credits if there is no cash or wages? I have no idea.
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Ron Wenrich

I'd value it the same as the other mills.  Home Depot may offer discounts for non-profits, and that isn't reflected in their shelf price.

Is there a limit on how much you can donate in a year?  You might run some of this stuff past your taxman. 
Never under estimate the power of stupid people in large groups.

DanG

I have gone to extreme lengths to keep the Government out of my business.  I've not claimed my mill or anything else as a business expense.  I don't keep track of fuel expenses, or any other expenses, and I don't claim any deductions for them, and that's all I'm going to say about that. ;D
"I don't feel like an old man.  I feel like a young man who has something wrong with him."  Dick Cavett
"Beat not thy sword into a plowshare, rather beat the sword of thine enemy into a plowshare."

brdmkr

Dodgy,

You need to be careful about how you do this.  If you itemize but do not claim your mill as a bussiness, you should be able to claim a deduction for the value of the lumber just like you can take a used refrigerator to the Salvation Army and deduct its value.  If you claim the mill as a bussiness, then it seems that you would be donating from your inventory.  You could deduct this as well, BUT I think inventory is taxable!  If you say that you are donating your labor for sawing, you will not be able to deduct anything. 

Having said all of this, I am no accountant, not even close!  But I have spent several nights in a Holiday Inn Express :D

I pay someone to do my taxes.  If you decide to pursue this, I would talk to my tax advisor.
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LeeB

'98 LT40HDD/Lombardini, Case 580L, Cat D4C, JD 3032 tractor, JD 5410 tractor, Husky 346, 372 and 562XP's. Stihl MS180 and MS361, 1998 and 2006 3/4 Ton 5.9 Cummins 4x4's, 1989 Dodge D100 w/ 318, and a 1966 Chevy C60 w/ dump bed.

mike_van

I was the smartest 16 year old I ever knew.

WDH

Another DanG fan ;D.

If you donate lumber to the farm, it does not matter how you acquired it as long as it is yours to donate it seems to me.  The value of the lumber can be documented through the market price at Home Depot.  Why even bring a sawmill into this picture?

Don't ask and don't tell as DanG would probably say :D.
Woodmizer LT40HDD35, John Deere 2155, Kubota M5-111, Kubota L2501, Nyle L53 Dehumidification Kiln, and a passion for all things with leafs, twigs, and bark.  hamsleyhardwood.com

Gary_C

Here is everything you need to know.

http://www.irs.gov/pub/irs-pdf/p526.pdf

But be aware that nothing is more of a red flag in the IRS computers than a large contribution that is a tax shelter. Make sure you do it by the book and there is nothing else in your tax return that is questionable. And have documents to back everything up. The wealthy people have tax experts to make sure they follow the rules so it is only the small honest guys that they can trip up.  ;D
Never take life seriously. Nobody gets out alive anyway.

Dodgy Loner

I work for the government, so keeping the government out of my business is not really an option ::).  That was a very helpful publication Gary. Based on the wording in there, it seems that getting a price from Home Depot or Lowe's for my lumber will be the best course of action.  A local sawmill may or may not be selling their lumber for what the IRS would consider "fair market value", but I'm pretty DanG sure that Home Depot does :)
"There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." -John Ruskin

Any idiot can write a woodworking blog. Here's mine.

4genlgr

Are you planeing these boards? or are they rough sawn? I'd do a little research at HD and Lowes, and also at the local sawmill selling to the public. Then take that info to an accountant or tax person.

OneWithWood

Be sure and get a receipt for the lumber from the not-for-profit.  The receipt can just have the bd ft and species and date delivered on it.  You can supply the value in comparison with a similiar product sold at the box stores or building supply.  Be sure and have some documentation on the cost of the similar item on the day you deliver it.

Your deduction may be limited to a percentage of your adgusted gross income, depending on how you report or don't report.  The irs pub is a good source of info.
One With Wood
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Chuck White

I'd just donate the lumber, and not mention the sawing!

For all anyone needs to know, you had the lumber laying around and just decided to donate it!  ;)
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Toolman

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cheyenne

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Home of the white buffalo

Dodgy Loner

Chuck, that's what I plan to do.  I will give them the lumber, and they will give me a receipt acknowledging that I donated XX bd.ft. of lumber valued at $XX.  I'm not planning to do anything illegal, so I'm not sure what you mean by the sleeping dog analogy, cheyenne.  I claimed more than $3000 worth of donated items as deductions on this year's tax return.  The previous owners of the house I bought left everything in it, so I gave most of it to Habitat for Humanity.  It's not a problem, since I have receipts for all the stuff and I didn't try to claim that it was worth more than it actually was.  The government can know anything they want to know about me because I have nothing to hide.
"There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." -John Ruskin

Any idiot can write a woodworking blog. Here's mine.

DanG

No, you're not doing anything wrong.  You own the lumber and it has a certain value.  If you donate it to a non-profit, you should take the tax break for it.  If you assign a $$ amount to the sawing however, that makes your sawmill a business in the minds of some IRS pinheads.  If you are already a declared business and are reporting as such, it doesn't matter how you do it.
"I don't feel like an old man.  I feel like a young man who has something wrong with him."  Dick Cavett
"Beat not thy sword into a plowshare, rather beat the sword of thine enemy into a plowshare."

Gary_C

I think you should go back to that IRS publication 526 and look at it again. From what I know, what you are going to do is not going to work, unless you just are small enough to fly under the IRS radar. Even if you are a business, you cannot deduct full market value, only the inventory cost that you carried in the previous year. In other words you can only claim your actual business costs such as labor, raw material, fuel, etc. that you have in the product, not full market value. And even as a business, you would have to show the inventory value you reported on your books last year.

So you cannot claim your time and efforts as a deduction. If you paid someone else to saw that product, you can claim what you paid others, but not yourself.

As far as the previous contribution to Habitat, that may be OK as long as you valued those items at their proper market value and not original cost. But be aware you may have to reduce your basis in that house by the value of the donated items. But that will only be important when you are old and sell the house. And when you are old the memory get short.  ;D

DanG it, I thought you had a pretty good idea here too, till I read more.   :D
Never take life seriously. Nobody gets out alive anyway.

DanG

It is virtually impossible to comply in full with all Gov't regulations.  Many of them are in place just so they can get the guys that are laundering money and such.  It is just as impossible for them to enforce all the rules on everybody as it is to follow all of them.  As long as you don't do anything to raise a red flag, they usually don't take a second glance.

Dodgy seems to be doing it right and probably won't be questioned about it.  Even if he is audited, they are very likely to accept most any sort of documentation.  In the unlikely event that they chose to disallow the deduction, he would just have to pay the little bit of extra tax.  It ain't like they're gonna throw him in the clink!  I would try to keep the name "Dodgy" out of the picture though. :D :D

One of the reasons I don't mess with long forms and scratching around for deductions is that I don't have enough of them to make a difference.  Not having a mortgage pretty much puts most people in a situation where the standard deduction is bigger than all the itemized deductions combined, so all that extra paperwork is for nothing. ::)
"I don't feel like an old man.  I feel like a young man who has something wrong with him."  Dick Cavett
"Beat not thy sword into a plowshare, rather beat the sword of thine enemy into a plowshare."

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